‘Zuma’s cabinet falls short’

Reuters.South African President Jacob Zuma takes his oath of office during his inauguration ceremony at the Union Buildings in Pretoria May 24, 2014.

Cape Town - South African President Jacob Zuma appointed a cabinet that economists and political analysts said fell short in inspiring confidence in an economy battered by labour unrest and slowing economic growth.

Zuma, 72, replaced Finance Minister Pravin Gordhan, 65, after a single term with his deputy, Nhlanhla Nene.

He also appointed new energy and mining ministers with no experience in those industries in an expanded cabinet that took office yesterday.

Zuma began his final term with the ruling African National Congress having won elections by the lowest margin since it came to power two decades ago and the economy struggling amid a four- month strike by platinum miners.

The rand snapped three days of gains yesterday, falling 0.6 percent against the dollar, the worst performer of 25 emerging-market currencies tracked by Bloomberg.

It was little changed at 10.3557 per dollar as of 8:10 a.m. in Johannesburg.

“The cabinet appointments suggest that political logic prevailed over economic reform priorities and a good governance agenda,” Anne Fruhauf, southern Africa analyst at New York-based risk adviser Teneo Intelligence, said in an e-mailed note to clients.

“Gordhan’s removal may raise concerns over the Treasury’s ability to stick to its course of fiscal consolidation and its clampdown on corruption.”

Tina Joemat-Pettersson, who was implicated by the nation’s corruption ombudsman in alleged irregularities in the awarding of government tenders as agriculture minister, will head up the energy ministry.

She has denied wrongdoing.

Zuma’s administration is focusing economic policy on the 20-year National Development Plan that seeks to cut the jobless rate to 14 percent by 2020 from 25 percent and boost the growth rate to at least 5.4 percent.

Government data today may show the economy contracted for the first time since 2009 by an annualised 0.2 percent in the first quarter, according to the median estimate of 22 economists surveyed by Bloomberg.

Zuma’s appointment of Cyril Ramaphosa, 61, as his deputy may help to shore up confidence.

Ramaphosa is one of the nation’s wealthiest black businessmen and helped draft the National Development Plan.

Expanded Cabinet

“A résumé of trade union activism and then successful private sector activities has pinned much market hope that Ramaphosa will repair relations between corporates, government and, especially, trade unions,” Gina Schoeman, an economist at Citigroup in Johannesburg, said in an e-mailed note to clients.

“His appointment is an obvious market positive.”

Gordhan was widely expected to retain his post.

During his term, he steered the economy through the first recession in 17 years, while fending off pressure from labour unions to increase spending in the face of a widening budget deficit.

“Investors would generally have preferred continuity in the form of Pravin Gordhan staying on as finance minister,” Dennis Dykes, chief economist at Nedbank in Johannesburg, said by phone.

Rather than the government expanding its role through a bigger cabinet, “investors would like to see more private sector participation in the economy,” he said.

Nene, 55, had been deputy finance minister since 2008.

He served on the committee that helped organise the 2010 soccer World Cup in South Africa and was chairman of the Public Investment, which invests civil servants’ pension funds.

Like Gordhan, he has stressed the need for the government to keep borrowing and inflation in check and bolster investment and economic growth.

“We’ve set a clear fiscal framework, so fiscal discipline in on the cards,” Nene said in an interview in Pretoria yesterday after being sworn into office.

“What we want to do is grow the economy. When it grows, we will be able to spend more.” - Bloomberg News

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